Another Harbinger of Things to Come?

Stocks picked up where they left off on Monday. And despite Tuesday’s calming session, Wednesday saw the major U.S. averages wallowing yet again in a sea of uncomfortable red.

The Dow plunged below the 17,000 mark while the S&P 500 broke below support at 2,000. Both of these levels are at the very least psychologically significant. And both have made investors all that much more nervous about what this means for the rest of the year.

As we pointed out in Monday’s Morning Edition, and again in the Afternoon Edition, the first five days of a new trading year often are a harbinger of things to come for the rest of the year. In fact, the outcome during the first five trading days of the year correlated to the full-year result some 84% of the time.

The major averages are down about 3% in just the first three trading sessions of the year. So, it’s certainly understandable to be at least a little bit uneasy about what this bodes for the future.

There’s something even more irksome about the selling today. That is, it came largely as a result of the ongoing struggles in China, and in the price of oil.

On Monday we woke up to some downbeat Chinese manufacturing data that confirmed further slowing. Today we woke up to similar slowing in the service sector of the economy.

Then we witnessed oil prices getting crushed, with crude plunging more than 5% in the session. The cost of a barrel of crude now trades at an 11-year low, and that condition is sure to continue pressuring energy stocks, and also the major averages, for some time to come.

Fueling the decline in oil today was new data on U.S. stockpiles of gasoline and distillates, including diesel fuel and heating oil. The data showed that stockpiles soared in the week ended Jan. 1, which offset a drop in crude supplies.

Now, total inventories of crude and refined products are again at record highs. So, it’s no surprise oil plunged.

Given the continued headwinds on this market of China and oil, what I said on Monday about big downside volatility and aggressive selling is worth repeating today.

While I think we’re sure to see more days like Monday and today, we also are likely to see big up days of the sort that are a virtual flipside to the selling coin. Moreover, the best way to successfully navigate this market is to put the power of our expert editors at Uncommon Wisdom Daily on your side.

In a market that’s shaping up to be a tough slog for investors, the more knowledge from proven experts you have on your side, the more likely you are to achieve your investing goals.

I loved writing about this topic. After all, a healthy form of skepticism regarding those in power is our right as citizens. More than that, it’s also part of a wider moral obligation I think we all have to help make this world a better place.

Apparently, many of you agreed. We received a lot of extremely positive and thoughtful feedback, some of which I want to share with you today.

David writes:

I think folks are figuring out that ALL legislation is bought and paid for by big-buck special interest groups using lobbyists. That’s why our tax code will NEVER be changed. Can you see the tax accounts or tax legal folks not fighting any tax law change? The same can be said for every area in our country.

Sharai writes:

Oh, I completely agree with you. I have no trust in the government, hardly any faith in the B.S. of politics and ultimately left with the feeling of sadness and helplessness for all the suffering of the people in our country and around the world. All for the love of POWER & GREED. I would WALK to D.C. right this minute (literally) if it meant that my march there would produce an outcome.

Pete writes:

I strongly agree with you in not trusting our current political leadership and in perceiving a lack of trust among Americans in general. Franklin is quoted as saying we have, "A Republic … if you can keep it." To maintain a successful republic requires a vigilant public.

Brad response: This concurrence in the virtue of distrust was rampant in the comments and e-mails we received on this issue. A few wrote in to debate some of the details of the points in the Gallup poll, and on the details of some of the issues mentioned in the article. But even those with dissenting opinions seemed to understand the broader stance.

I will leave you with a final reader comment on this topic. It is comments such as the following that make me feel good about my life’s work.

***

Barry M writes:

Wow! Great article. It really hit home while I was reading all the comments on your site. For me this is the exact reason I subscribe to the Weiss services. It is almost impossible to get unbiased information from any source available to the general public. The readers’ comments definitely reflect the distrust in all areas of our society in general. I think the First Amendment is definitely being exercised "as it should be," I think we DO need to distrust government, just like our Founding Fathers did when they had the experiences of oppression fresh in their minds. The Constitution is an attempt of a people who had just escaped an oppressive government to lay down a blueprint for future generations to maintain the freedom they had just fought to gain. We should defend it at all costs.

Thank you, Barry, and a huge thanks to all of you who write in and fling yourselves into the arena of ideas. The more we can learn to agree, and the more we can define our areas of disagreement, the better this world will be.

Stocks saw another big sell-off. The Dow and S&P 500 slid below their psychologically important 17,000 and 2,000 marks. This represented losses of 1.5% and 1.3%, respectively.

China’s economic data and plunging crude prices once again led the charge lower. West Texas Intermediate crude oil fell below a psychologically important level — $35 a barrel. WTI ended the day at $33.97.

Here’s what else happened today …

Netflix (NFLX) says it is now live in more than 130 countries, noting that China is not one of them. Shares surged 9.3%, a welcome sight in today’s sea of red.

The December FOMC meeting minutes showed the December rate hike was a "close call." Some members said they had "significant" concerns about low inflation. The committee voted unanimously to raise the Fed Funds rate thanks to labor market strength.

North Korea says it successfully detonated a hydrogen bomb for the first time. The White House reviewed data from its monitoring station and disputes the claim, saying the size of the explosion was not consistent with what would have been North Korea’s most powerful weapon to date.

The House of Representatives just voted to repeal Obamacare. The Senate passed the bill in late 2015. It is now heading to President Obama, where he is expected to veto it.

Good Luck and Happy Investing,

Brad Hoppmann

Publisher

Uncommon Wisdom Daily

Your thoughts on “Another Harbinger of Things to Come?”

If we want to change the tax code then we need leadership that doesn’t have to cow-tow to special interest groups, politically bullying industries like big pharma, and food conglomerates, etc. Our currant politicians are an anathema and claptrap. Our dullard of a president, Mr. Obama, specializes in diatribe on the American tax paying citizens. We need to start with a President who has efficacy and to mitigate government to the benefit of its citizens. The Democratic nominees if elected will be the… same old-same old, tenuous at best. Most of the Republican candidates postulate the attributes our country needs. One republican canidate hits the nail on the head and that’s Donald Trum

Looks like no surprises from my perspective…The Global Capital Markets are behaving now almost exactly how I expected things to turn out. You could look at my past comments for verification. Brad, many of your readers have lambasted the government, etc..etc..but that is ONLY half the problem. The other problem is Big Business and Big Banking which, essentially controls governments, not just here, but around the world. The question now is has all the plundering of the middle class by the global elites go so far as to blowback on the elites…If things go the way I believe they will go, this next downturn will backfire on the elites. It is well known that many are building redoubts and shelters just in case things get out of hand…Boy do we live in interesting times!!!

I assume that the same White House that disputes the North Korea claims is the same one that tells us that ISIS is contained and that they found no evidence of wrong doing by the IRS in targeting conservative groups.

Brad Hoppmann originally grew up in Florida, but has lived in Baltimore, Charlotte and New York as well throughout his career. Always an athlete, he played varsity football and water polo at the University of Florida and received All-SEC/SCC honors. →